From expensive groceries to higher utility bills, rising costs are putting a strain on many people’s budgets. But for homeowners, surging home prices have a silver lining: There’s more value in those walls.
In fact, home equity nationwide has hit record levels in recent months. So, while a typical homeowner might feel “cash poor,” they’ve actually become “house rich.” And that creates a golden opportunity.
“Using the equity in your home is one of the best options to get money when you need it,” said Monica Shannon, virtual mortgage loan originator with Honor Credit Union. “This is a really great time to do it, to get things done before winter.”
Get Answers To Home Equity FAQs
Why might it be a good idea for you to tap your home equity this fall? Here are five reasons:
- Get Your Home Ready For Winter – Sure, fall is gorgeous in Michigan. But snow storms are coming! Go through this upcoming winter worry-free when you use your home equity to take care of any needs such as a new roof or furnace now before temperatures plunge.
- Boost Your Curb Appeal Before Next Spring – If you’re thinking about selling your home next year or just want to tidy things up for your own enjoyment, fall is primetime for outdoor projects such as new landscaping and updates to your home’s exterior. New siding and doors, fencing, planting beds and more can make a big difference in the look of your property.
- Prep For The Holidays – Spruce up your home’s interior with a bathroom renovation, kitchen remodeling or living room makeover, and get it done in time for any holiday gatherings you’re hosting. You also can use a home-equity loan to consolidate existing high-interest debt at a lower rate, freeing up space in your budget for holiday spending.
- Increase Your Cash Flow – Speaking of your budget, have you noticed your utility bills lately? By using your home equity to pay for energy-efficient improvements such as new windows, new insulation or new heating and cooling systems, you can cut your monthly expenses with lower heat bills all winter (and then lower AC bills next summer!).
- Increase Your Home Equity – By using your home equity to pay for certain home improvements, you can actually increase the value of your home so that the net cost of the project is basically free. How great a deal is that?! Adding a new bedroom or bathroom, for example, or remodeling your kitchen can recoup much or even all of the cost through increased home equity.
Which Way Of Using Home Equity Is Best For You?
There are three main ways to take advantage of the equity in your home. One is a cash-out refinance that pays off your current mortgage, shifts a chunk of equity into your checking account and establishes a new mortgage.
The primary benefit of a cash-out refinance is that you keep just one monthly payment on your house. However, a refinance might not be the best idea for homeowners who currently have a mortgage rate that’s lower than the 6% to 7% currently available in the market.
A second option for unlocking home equity is through a home-equity loan. You’ll keep your current mortgage and add a second mortgage that borrows against the value of the equity you’ve built. A home-equity loan is often a wise choice for funding a one-time expense such as finishing a basement or adding a bathroom.
For example, if you have $100,000 of equity in your home, you could borrow a lump-sum based on that amount. It functions like an auto loan, with monthly payments until it’s paid off. Fees are nominal and interest rates are much lower than on a personal loan.
A third option is a home equity line of credit, or HELOC. This works more like a credit card. You can get approved for a certain credit limit based on the amount of equity you have in your home, and then you can spend on that line of credit as needed. A HELOC is ideal if you want flexible access to funds for ongoing projects, perhaps new windows this fall, then new siding next spring and then a big vacation next summer.
Although you might be approved for a $100,000 line of credit, you only repay and incur interest on the amounts you actually spend.
So, which home-equity product is best for you? The loan professionals at Honor Credit Union can “look at your situation and assess whether you’re better doing a cash-out refinance, home-equity loan or HELOC,” Shannon said.
Check out this home equity calculator and see how much money you could have to play with this fall!
Need Help?
Honor Credit Union is here for you. Our team is ready to help you find a financial solution that can work for you. Call or visit a location today.